While presenting the General Budget 2016-17 in Lok Sabha today, the Union Finance Minister Shri Arun Jaitley said that uniform application of Dividend Distribution Tax (DDT) to all investors distorts the fairness and progressive nature of taxes. He therefore proposed that in addition to DDT paid by the companies, tax at the rate of 10% of gross amount of dividend will be payable by the recipients, that is, individuals, HUFs and firms receiving dividend in excess of ₹ 10 lakh per annum.

The surcharge was increased from 12% to 15% on persons having income above ₹ 1 crore. The rate of Securities Transaction tax in case of ‘options’ was increased from 0.017% to 0.05%.

In order to tap tax on income accruing to foreign e-commerce companies from India, it was proposed that a person making payment to a non-resident, who does not have a permanent establishment, exceeding in aggregate ₹ 1 lakh in a year, as consideration for online advertisement, will withhold tax at 6% of gross amount paid, as Equalization levy. This levy will apply only on B2B transactions.

It was also proposed to collect tax at source at the rate of 1% on purchase of luxury cars exceeding value of ₹ 10 lakh and purchase of goods and services in cash exceeding ₹ 2 lakh.

Sh. Arun Jaitley proposed Krishi Kalyan Cess @ 0.5% on all taxable services. Its proceeds would be exclusively used for financing initiatives relating to improvement of agriculture and welfare of farmers. It will come into effect from 1st June, 2016.

To tackle the pollution and traffic situation in the country, the Union Finance Minister proposed infrastructure cess of 1% on small petrol, LPG, CNG cars, 2.5% on diesel cars of certain capacity and 4% on other higher engine capacity vehicles and SUVs. The ‘Clean Energy Cess’ levied on coal, lignite and peat was proposed to be renamed as ‘Clean Environment Cess’. Its rate was increased from ₹ 200 per tonne to ₹ 400 per tonne.

To discourage consumption of tobacco and tobacco products, Sh. Arun Jaitley proposed to increase the excise duties on various tobacco products other than beedi by about 10 to 15%.

Also, an important proposal made was to amend the Finance Act 1994 so as to declare assignment by the Government of the right to use the radio-frequency spectrum and its subsequent transfers a service. This will help clarify that assignment of right to use the spectrum is a service leviable to service tax and not sale of intangible goods.  

Krishi Kalyan Cess introduced to fund agriculture initiatives, affecting taxable services and compliance for service providers. A Krishi Kalyan Cess will be levied on taxable services with proceeds exclusively for agriculture and farmer welfare effective 1 June 2016; new withholding rules will capture payments to non-resident suppliers of online advertising lacking a permanent establishment, and tax collection at source will apply to certain high-value cash and luxury vehicle purchases. Dividend recipient taxation, surcharge and securities transaction tax on options were adjusted, excise rates on tobacco increased, tiered infrastructure cess on motor vehicles introduced, the clean energy cess renamed and increased, and assignment of radio-frequency spectrum declared a service taxable under the Finance Act.